Ailing automotive sector lost Rs 2,300 Cr per day during lockdown; Govt panel recommends tweak in CSR policy to help

New Delhi, 19 January 2021: For the ailing automotive sector which further lost Rs 2,300 crore per day during the lockdown, a tweak in the existing CSR policy was recommended by a department-related Parliamentary Standing Committee on Industry in its three hundred and third report submitted to Rajya Sabha last month.

"The expenditure incurred by companies for making payments to temporary and contract labour during the lockdown period should be eligible as CSR expense," recommends the committee in its report named ‘Down in Automobile Sector- Its impact and Measures for Revival’.

The committee found that there is a tremendous dip in the Automobile production and sales indicating negative growth or slowdown in the Auto Sector. The dip was witnessed even before the lockdown was imposed on the country to restrict transmission of Covid-19 infection. The Lockdown only widened the crisis of Automobile sector, as per the committee.

It says, the drop in sales over the last one and half years has forced major manufacturers to cut production including the automobile components and ancillaries. The continuous decline in sale is putting pressure on the manufacturers to downsize their manpower.

The Committee was informed by the Auto Industry Associations that all the major Original Equipment Manufacturer (OEM) have cut down their production by 18-20% due to low demand and decline in sales of vehicles.

Then came the Corona outbreak which put the whole country on halt. India imposed nationwide lockdown commencing from 25th March, 2020. The national lockdown led to a total shutdown of all Automotive Plants that further pushed down the Indian Automotive Sector which was already reeling under a prolonged slump with sales down nearly to 18% in 2019-20, says the committee in its report.

As per it, the production stoppage at the automotive OEM and component supplier due to Covid-19 pandemic and subsequent lockdowns led to a loss of approximately Rs 2,300 crore per day to the automotive sector.

It goes on to say that the actual magnitude of the impact depends on the duration of lockdown period, the intensity and extent of spread of the Covid-19 outbreak. Considering the crisis, it is predicted that the automobile industry is likely to go through at least two consecutive years of severe contraction, it adds.

To boost the sector, the committee recommends several initiatives which includes the expenditure incurred by companies for making payments to temporary and contract labour during the lockdown period should be eligible as CSR expense.

Other than this, it recommends changes in GST on different segment of vehicles, clarifying scrappage policy etc.

Mentioning the relief package announced by the government, the committee termed it insufficient. It recommended that the government should focus on announcing a stimulus package for demand generation for the automotive sector where the government spending could boost a faster revival of the economy.